A coalition of seven attorneys general recently requested information from six buy now, pay later (BNPL) providers to evaluate their BNPL programs and whether they comply with consumer protection laws. The coalition is comprised of attorneys general from California, Colorado, Connecticut, Illinois, Minnesota, North Carolina and Wisconsin, with Connecticut and North Carolina leading the inquiry. Company responses are due by December 31.
The inquiry follows the May 2025 recission by the Consumer Financial Protection Bureau (CFPB) of a Biden-era interpretive rule stating that providers of certain pay-in-four BNPL products are “card issuers” and therefore subject to certain provisions of Regulation Z, which implements the Truth in Lending Act (TILA). As a result, pursuant to the interpretive rule, consumers would have been entitled to the disclosures and protections that apply to credit cards, such as investigation of consumer billing disputes, refunds for returned products and liability protection for unauthorized credit use.
This attorneys general-led inquiry is an example of how states are continuing to fill the void left by the federal government’s retreat from consumer protection supervision and regulation.
The inquiry
The attorneys general requested documents and information on various aspects of the BNPL loan programs, including:
- Procedures for addressing consumers’ disputes over purchases or billing
- Ability to repay evaluation procedures
- Credit reporting procedures
- Internal analyses of delinquencies and defaults
- Consumer contracts, user agreements and disclosures
- Customer service practice and procedures
Interestingly, the inquiry also requests information on “efforts [made] to comply with Subpart B of the federal Truth in Lending Act and the status of those efforts,” although, as noted, whether Regulation B and TILA apply to BNPL programs is not clear following the rescission of the CFPB’s interpretive rule.
Companies must provide information dating back to January 2023.
What’s next?
The state attorneys general inquiry follows other recent queries of BNPL providers as the CFPB has backed away from regulating the product. Last month, a group of Senate Democrats sent letters to seven BNPL providers requesting data to better understand “these products, any associated risks to consumers, and their impact on the economy.” Citing concerns about the lack of regulation of the products, the senators similarly sought information on fees, underwriting, servicing, credit reporting, returns and refunds, delinquencies and defaults, state licensing, disclosures and user demographic data.
States have also stepped up to regulate BNPL products. Beyond the state attorneys general inquiry, New York enacted the first state law to require BNPL providers to become licensed. The law also requires providers to follow certain disclosure and other substantive requirements. The law will go into effect following the enactment of regulations by the New York State Department of Financial Services.
More broadly, the state attorneys general inquiry reflects the rise of state action to enforce consumer protection statutes in response to the reduced enforcement and supervisory efforts of the CFPB and other federal agencies. In fact, former CFPB Director Rohit Chopra was just tapped by the Democratic Attorneys General Association to lead a new working group focused on consumer protection and affordability. The working group is charged with developing recommendations for state attorneys general related to curbing abusive practices in the financial services, technology and healthcare arenas. Now, with the future of the CFPB uncertain, we expect states to continue to take a more prominent role in consumer protection enforcement.